Nbc-Usa Housing, Inc, Twenty-Six v. Donovan

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

NBC-USA HOUSING, Inc., TWENTY-SIX

Plaintiff,

v. Civil Action No. 09–2245 (CKK) SHAUN DONOVAN, Secretary of the Department of Housing and Urban Development, et al.,

Defendants.

MEMORANDUM OPINION (September 27, 2010)

Plaintiff NBC-USA Housing, Inc. Twenty-Six (“Plaintiff”) filed this action against

Defendants Shaun Donovan as Secretary of the Department of Housing and Urban Development

(“HUD”), Roy S. Lilly as a HUD foreclosure commissioner, and Jim Hotard Properties, LLC

(“Hotard”) alleging that Defendants violated HUD’s procedures and the Administrative

Procedure Act (“APA”) when HUD foreclosed on Plaintiff’s property. Currently before the

Court are Hotard’s [13] Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(2)

for Lack of Personal Jurisdiction (“Hotard’s Mot.”) and Plaintiff’s [19] Opposition to Hotard’s

Motion to Dismiss (“Pl.’s Opp’n”), in which Plaintiff also moved for jurisdictional discovery.

For the reasons explained below, the Court shall GRANT Hotard’s Motion to Dismiss

and DENY Plaintiff’s construed motion for jurisdictional discovery. I. BACKGROUND

On September 29, 1999, Plaintiff, a non-profit organization, entered into a series of

agreements with HUD to fund Plaintiff’s construction of Fortner Manor Apartments (“Fortner

Manor”), an apartment complex in New Orleans, Louisiana. Compl. ¶¶ 1, 6-7, 9. Pursuant to the

parties’ Capital Advance Program Mortgage, HUD advanced Plaintiff $1,535,700 and took a

security interest in Fortner Manor. Id. ¶ 9. In the parties’ Capital Advance Program Use

Agreement, Plaintiff also agreed to operate Fortner Manor as low income housing for the elderly

or disabled for 40 years. Id. ¶¶ 10-12.

In August 2005, Hurricane Katrina struck New Orleans and caused extensive damage to

Fortner Manor, rendering the complex uninhabitable. Id. ¶¶ 13, 19. As of the commencement of

this case, Fortner Manor has remained uninhabited since Hurricane Katrina. Id. ¶ 23.

In October 2008, HUD informed Plaintiff that its failure to operate Fortner Manor as low

income housing breached the parties’ Capital Advance Program Use Agreement and,

consequently, Plaintiff was in default. Id. ¶¶ 23-25. On June 8, 2009, Plaintiff discovered that

HUD had issued an “Invitation to Bid” on Fortner Manor, thereby beginning the non-judicial

administrative foreclosure process. Id. ¶ 28. After Plaintiff’s unsuccessful attempts to stay the

foreclosure, see id. ¶¶ 29-42, HUD held a foreclosure sale on July 28, 2009, and Hotard was the

successful bidder, id. ¶¶ 43-44.

Hotard is a Louisiana limited liability company, id. ¶ 3, that operates as a real estate

holding company, Hotard’s Mot. Ex. A (Affidavit of James S. Hotard Jr.) (hereinafter “Hotard

Affidavit”) ¶ 4. Plaintiff’s eighty-eight paragraph complaint includes only five factual

allegations regarding Hotard: (1) Hotard is a Louisiana limited liability company with an office

2 in New Orleans, Louisiana, Compl. ¶ 3; (2) Hotard was the successful bidder at Fortner Manor’s

foreclosure sale, id. ¶ 44; (3) Hotard is a for-profit company, id. ¶ 45; (4) Hotard refused to

complete the sale of Fortner Manor because HUD did not follow proper foreclosure procedures,

id. ¶ 48; and (5) in the alternative, Hotard completed the sale of Fortner Manor, id. ¶ 49.

Plaintiff filed its complaint in this case on November 25, 2009. After the Court granted

Hotard’s [10] Consent Motion to Extend Time to Respond to the Complaint, see Min. Order

(Dec. 30, 2009), Hotard filed its pending motion to dismiss, attaching the Hotard Affidavit as an

exhibit thereto. Hotard’s managing member, James S. Hotard Jr., declares that Hotard has never

shipped products, contracted to sell products, provided services, contracted to render services,

solicited business, advertised its products, maintained an office or mailing address, employed

agents, officers, or employees, or owned real or personal property in the District of Columbia.

See Hotard Aff. ¶¶ 5-13; Hotard’s Mot. at 2 (“Hotard is a real property holding company with no

contacts, connections, or ties whatsoever to the District of Columbia.”). Plaintiff does not

dispute that Hotard lacks the abovementioned contacts with the District of Columbia, rather

Plaintiff avers that “for Hotard to claim legal title to the property known as Fortner Manor

Apartments, [Hotard] would have had to enter into a sale contract with HUD. Since HUD is a

federal agency headquartered in the District of Columbia, Hotard would have had to transact

business within this district.” Pl.’s Opp’n at 10 (footnote omitted). Plaintiff has not alleged that

Hotard has any other contacts with the District of Columbia.

II. LEGAL STANDARD

A plaintiff bears the burden of establishing a factual basis for asserting personal

jurisdiction over a defendant. See Crane v. N.Y. Zoological Soc’y, 894 F.2d 454, 456 (D.C. Cir.

3 1990). “The plaintiff, however, cannot rest on bare allegations or conclusory statements and

must allege specific facts connecting each defendant with the forum.” GTE New Media Servs.,

Inc. v. Ameritech Corp., 21 F. Supp. 2d 27, 36 (D.D.C. 1998); see also Second Amendment

Found. v. U.S. Conference of Mayors, 274 F.3d 521, 524 (D.C. Cir. 2001) (same). “To make

such a showing, the plaintiff is not required to adduce evidence that meets the standards of

admissibility reserved for summary judgment and trial; rather she may rest her arguments on the

pleadings, ‘bolstered by such affidavits and other written materials as [she] can otherwise

obtain.’” Urban Inst. v. FINCON Servs., 681 F. Supp. 2d 41, 44 (D.D.C. 2010) (quoting Mwani

v. bin Laden, 417 F.3d 1, 7 (D.C. Cir. 2005)) (alteration in original). When determining whether

personal jurisdiction exists over a defendant, the Court need not treat all of a plaintiff’s

allegations as true. Instead, the Court “may receive and weigh affidavits and any other relevant

matter to assist it in determining the jurisdictional facts.” United States v. Philip Morris, Inc.,

116 F. Supp. 2d 116, 120 n.4 (D.D.C. 2000) (citation omitted). Any factual discrepancies with

regard to the existence of personal jurisdiction, however, must be resolved in favor of the

plaintiff. See Crane, 894 F.2d at 456.

III. DISCUSSION

A. Personal Jurisdiction

For this Court to exercise personal jurisdiction over Hotard, Plaintiff must plead facts

sufficient to satisfy (1) the District of Columbia’s long-arm statute (hereinafter “long-arm

statute”) and (2) the constitutional requirements of due process. See GTE New Media Servs. Inc.

v. BellSouth Corp., 199 F.3d 1343, 1347 (D.C. Cir. 2000); see also Edmond v. U.S. Postal Serv.

Gen. Counsel, 949 F.2d 415, 424 (D.C. Cir. 1991) (“Even though subject-matter jurisdiction is

4 here predicated upon a federal question, [plaintiffs] must rely on D.C. law to sue nonresident

defendants, since no federal long-arm statute applies.”). The long-arm statute provides in

pertinent part:

(a) A District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person’s-

(1) transacting any business in the District of Columbia; ....

D.C. Code § 13-423. In this case, Plaintiff asserts that jurisdiction is proper under subsection

(a)(1) because “in order for Hotard to claim legal title to the property known as Fortner Manor

Apartments, [Hotard] would have had to enter into a sale contract with HUD. Since HUD is a

federal agency headquartered in the District of Columbia, Hotard would have had to transact

business within this district.” Pl.’s Opp’n at 10 (footnote omitted). Plaintiff does not allege that

jurisdiction is proper under another subsection of the long-arm statute, nor does Plaintiff allege

that any other contacts justify this Court exercising personal jurisdiction over Hotard. See Pl.’s

Opp’n at 9-10.

Hotard’s contact with HUD, however, does not establish personal jurisdiction because

District of Columbia law excludes its consideration under the so-called government contacts

principle. “The government contacts principle establishes that entry into the District by

nonresidents for the purpose of contacting federal governmental agencies cannot serve as a basis

for personal jurisdiction.” Savage v. Bioport, Inc., 460 F. Supp. 2d 55, 62 (D.D.C. 2006)

(quoting Freiman v. Lazur, 925 F. Supp. 14, 24 (D.D.C. 1996)). “To allow a defendant’s contact

with a federal instrumentality to serve as a contact for personal jurisdiction analysis ‘would

threaten to convert the District of Columbia into a national judicial forum.’” Freiman, 925 F.

5 Supp. at 24 (quoting Envtl. Research Int’l, Inc. v. Lockwood Greene Eng’rs, Inc., 355 A.2d 808,

813 (D.C. 1976)). Accordingly, the government contacts principle precludes Hotard’s alleged

sales contract with HUD from establishing personal jurisdiction in this case. See Ficken v. Roe,

594 F. Supp. 2d 71, 75 (D.D.C. 2009) (excluding defendant’s receipt of funds from the State

Department from establishing personal jurisdiction); Savage, 460 F. Supp. 2d at 62 (holding that

defendant’s contracts to sell vaccines to the Department of Defense did not create personal

jurisdiction due to the government contacts principle). As the alleged sales contract is the only

contact Plaintiff alleges between Hotard and the District of Columbia, the Court concludes that

Plaintiff has not alleged specific facts that establish personal jurisdiction over Hotard.1

B. Jurisdictional Facts Intertwined with the Merits

Plaintiff argues that the Court should at least delay considering whether it has personal

jurisdiction over Hotard until trial because the jurisdictional facts are intertwined with the merits

of this case. Pl.’s Opp’n at 12-13. Specifically, Plaintiff claims that “[t]he possible email

transactions and telephone and facsimile exchanges that confer special jurisdiction would also

likely disclose the details surrounding [Plaintiff’s] claims that HUD’s foreclosure sale and

transfer of the property was improper.” Id. at 13.

When confronted with jurisdictional facts so “inextricably intertwined with the merits of

the case,” a trial court “should usually defer its jurisdictional decision until the merits are heard.”

Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 198 (D.C. Cir. 1992); see also Brady Campaign to

Prevent Gun Violence v. Salazar, 612 F. Supp. 2d 1, 29 n.18 (D.D.C. 2009) (declining an

1 For the same reasons, the Court denies Plaintiff’s argument that the alleged sales contract establishes personal jurisdiction over Hotard under the District of Columbia’s general personal jurisdiction statute. See Pl.’s Opp’n at 11; D.C. Code § 13-334(a).

6 extended analysis of whether the plaintiff had organizational standing because the arguments

regarding standing implicated the merits). The Court finds, however, that whether this Court has

personal jurisdiction over Hotard is not intertwined, much less inextricably, with the merits of

this case. Regardless of whether Fortner Manor’s foreclosure complied with the APA and HUD

procedures, the nature of Hotard’s contacts with the District of Columbia will remain unaffected.

The fact that the same evidence may both support Plaintiff’s claims and indicate Hotard’s contact

with HUD, does not render the merits of this case inextricably intertwined with the personal

jurisdiction issue currently before the Court.

C. Jurisdictional Discovery

As a final alterative, Plaintiff requests that it at least be granted “an opportunity to

conduct a modest period of discovery designed to establish the known jurisdictional predicates

with record evidence.” Pl.’s Opp’n at 14.

“It is well established that the ‘district court has broad discretion in its resolution of

[jurisdictional] discovery problems.’” FC Inv. Grp. LC v. IFX Markets, Ltd, 529 F.3d 1087,

1093 (D.C. Cir. 2008) (quoting Naartex Consulting Corp. v. Watt, 722 F.2d 779, 788 (D.C. Cir.

1983)). “This Circuit’s standard for permitting jurisdictional discovery is quite liberal.”

Diamond Chem. Co. v. Atofina Chems., Inc., 268 F. Supp. 2d 1, 15 (D.D.C. 2003). “[H]owever,

in order to get jurisdictional discovery a plaintiff must have at least a good faith belief that such

discovery will enable it to show that the court has personal jurisdiction over the defendant.”

Caribbean Broad. Sys., Ltd. v. Cable & Wireless PLC, 148 F.3d 1080, 1090 (D.C. Cir. 1998)

(denying jurisdictional discovery when plaintiff “did not allege any facts remotely suggesting that

[the defendant] had any connection to the District of Columbia”). Moreover, “a plaintiff must

7 make a ‘detailed showing of what discovery it wishes to conduct or what results it thinks such

discovery would produce.’” Atlantigas Corp. v. Nisource, Inc., 290 F. Supp. 2d 34, 53 (D.D.C.

2003) (quoting Philip Morris, 116 F. Supp. 2d at 130 n.16). “Where there is no showing of how

jurisdictional discovery would help plaintiff discover anything new, ‘it [is] inappropriate to

subject [defendants] to the burden and expense of discovery.” Id. (quoting COMCAST Corp. v.

Finshipyards S.A.M., 900 F. Supp. 515, 524 n.4 (D.D.C. 1995)) (alterations in the original); see

also FC Inv. Grp., 529 F.3d at 1093 (“[A] request for jurisdictional discovery cannot be based on

mere conjecture or speculation.”).

In this case, Plaintiff has failed to demonstrate a good faith belief that jurisdictional

discovery will enable it to establish personal jurisdiction over Hotard. First, Plaintiff has

requested jurisdictional discovery only “to establish the known jurisdictional predicates with

record evidence.” Pl.’s Opp’n at 14. This is far from a “detailed showing of what discovery

[Plaintiff] wishes to conduct or what results it thinks such discovery would produce.” Atlantigas

Corp., 290 F. Supp. 2d at 53; compare Diamond Chem. Co., 268 F. Supp. 2d at 15 (granting

plaintiff’s request for jurisdictional discovery to “seek more complete information about the

managerial control exerted by [defendant’s] executives over [defendant’s] affiliates, the flow of

funds between the affiliates, and [defendant’s] knowledge of and participation in the . . . price-

fixing conspiracy”) (internal quotation marks omitted). On this basis alone, Plaintiff’s request

for jurisdictional discovery is insufficient. See Atlantigas Corp., 290 F. Supp. 2d at 53 (denying

plaintiff’s request for jurisdictional discovery “to confirm that the . . . [d]efendants have

customers in the District of Columbia or otherwise ‘transact business’ in the District of

8 Columbia” because “such generalized predictions are not enough to justify jurisdictional

discovery.”).

Second, to the extent Plaintiff’s laconic request seeks jurisdictional discovery of the sole

contact Plaintiff alleges between Hotard and the District of Columbia––Hotard and HUD’s sales

contract––jurisdictional discovery is inappropriate. For even if Plaintiff were able to establish

this alleged contact through jurisdictional discovery, the government contacts principle would

exclude it from the personal jurisdiction calculus. See Savage, 460 F. Supp. 2d at 63 (denying

the plaintiff’s requests for jurisdictional discovery after the plaintiff’s only alleged contact

between the defendant and the District of Columbia was excluded under the government contacts

principle). Alternatively, to the extent Plaintiff’s request seeks jurisdictional discovery of other,

unalleged contacts between Hotard and the District of Columbia, “a request for jurisdictional

discovery cannot be based on mere conjecture or speculation.” FC Inv. Grp., 529 F.3d at 1093.

In conclusion, Plaintiff has failed to demonstrate “a good faith belief” that it is entitled to

jurisdictional discovery because Plaintiff has not alleged a single contact between Hotard and the

District of Columbia that, if discovered, could establish personal jurisdiction. Caribbean Broad.,

148 F.3d at 1090. To nonetheless allow Plaintiff to conduct jurisdictional discovery would

require this Court to construe this Circuit’s admittedly liberal jurisdictional discovery standard in

such a way as to render it meaningless. The Court refuses to do so and, accordingly, shall deny

Plaintiff’s motion for jurisdictional discovery.

IV. CONCLUSION

For the foregoing reasons, the Court shall GRANT Hotard’s [13] Motion to Dismiss

Pursuant to Federal Rule of Civil Procedure 12(b)(2) for Lack of Personal Jurisdiction and

9 DENY Plaintiff’s construed [19] motion for jurisdictional discovery. An appropriate order

accompanies this Memorandum Opinion.

Date: September 27, 2010.

/s/ COLLEEN KOLLAR-KOTELLY United States District Judge